Taking a Deeper Dive Into TSLA’s Unexpected Rally — An Ambitious Future
Last week, Tesla experienced an unexpected rally after holding out in an overall bearish market for nearly a year. The stock has experienced 10 consecutive days of growth so far, soaring more than 40% to a price of $262.33 at the time of writing. This sudden surge in price brings the stock close to its December 2023 peak and erased most of this year’s losses.
Analysts on Wall Street are saying that this rally is mostly driven by the strong Q2 deliveries figure that Tesla recently announced, and while this is indeed true, a couple other important factors comes into play as well. Let’s look into them.
Strong Quarterly Deliveries
Let me start off with Tesla’s Q2 report. According to the report, the company delivered 443,956 vehicles and produced 410,831 vehicles. While deliveries were actually down 5% compared with the second quarter of 2023, it beat the analyst consensus of ~439,000 (Source: Investopedia).
Tesla’s delivery figure is closely watched by analysts as it reflects both the efficiency and capacity of the company’s production. As an EV company, the efficient production lines are a vital part of the Tesla fundamentals that Tesla must stabilize and improve. By being able to consistently hit/exceed delivery targets, Tesla can put itself in a position to continue scaling up its operations, which is vital for continued growth.
EU and US Tariffs on Chinese EVs
For those of you who have been staying up to date in the EV industry, you may have heard that both the EU (most recently) and US has been raising tariffs on Chinese EVs. These new tariffs in EU countries range from 17.4% to 37.6% on individual Chinese EV manufacturers and is added on top of a 10% duty already in place (Source: BBC). According to the White House, US tariffs on Chinese EVs were also raised to 100% (crazy!) back in May with the intention to “protect American manufacturers from China’s unfair trade practices”.
As of May 2024, Tesla remains a market leader in EU countries, holding a 10.5% market share (Source: European Commission) and is mainly competing with other European car manufacturers such as BMW, close behind Tesla with a 10.3% market share. In the US, Tesla EV sales account for roughly 49.7% of EV sales (Source: The Information).
Recently, one of Tesla’s biggest competitors globally has been BYD, a Chinese EV company. Higher tariffs on Chinese EVs in the EU and US will definitely help Tesla protect, if not gain market share.
Musk’s Plans For Tesla
Musk’s long term vision for Tesla involves the company making moves into the artificial intelligence and robotics industries, eventually building an ecosystem that will revolve around Tesla EVs. As this Bloomberg article says, “Tesla Inc. is, according to its promoters — very much including Chief Executive Elon Musk — an artificial intelligence giant trapped in a carmaker’s body”. If Elon’s long term vision for Tesla is successful, it will mark a huge technological advancement and will be immensely valuable for Tesla as a company.
- Full Self Driving Tesla Vehicles + Dojo: Tesla’s Full Self-Driving (FSD) is an advanced driver-assistance system designed with an end goal to enable full autonomous driving on Tesla vehicles. While Tesla’s FSD is being continuously improved, as for now it still requires driver supervision and has not been fully approved by regulators yet. As Tesla’s FSD technology matures, approval from regulators shouldn’t be a problem and would just be a matter of time. Additionally, Musk has also been pouring over $1 billion into the Tesla Dojo (Source: Mint), a supercomputer that Tesla is building to for high efficiency video processing + recognition as well as AI training. Since July 2023, every single one of Tesla’s ~4.5 million vehicles on the road have been transmitting video data back to Tesla. With the help of the supercomputer that Tesla has been building, the company will be able to efficiently process this huge amount of data and use it to train the FSD system.
- Robotaxi: Tesla’s Robotaxi concept is like Tesla’s driverless alternative for Uber. This will likely be heavily dependent on the reliability of Tesla’s FSD system, and again, like everything else Tesla has been working on, has a tremendous amount of potential. We don’t know too much about Tesla’s Robotaxis yet, but our first prototype should be coming this August. It will likely be a while from now before Robotaxis are able to run, but once safety and reliability is ensured, the technology is set to revolutionize our current transportation system, providing a more cost efficient as well as a more convenient transportation method.
- Optimus: Tesla’s humanoid robot project, designed to automate dangerous or repetitive tasks in the production process. Just less than a week ago, Optimus Gen 2 made an appearance at the 2024 World AI Conference in Shanghai. As Optimus matures and becomes cheaper to mass produce, Tesla can implement it into production lines to automate the production process, creating a more cost effective and efficient production system.
Tesla’s Future — Too Ambitious?
From where we stand now, Tesla’s future looks quite promising but also filled with uncertainty. Tesla’s recent 40% rally really shows the high expectations investors have for the company’s future. With numerous ambitious endeavors underway, Tesla has positioned itself as a market leader looking to lead innovation in not just the EV, but also AI and robotics industries. The critical challenge for Tesla now is delivering the results it has promised to its investors. Consistent performance and meeting its ambitious targets will be key to sustaining investor confidence and driving long-term growth.
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